Inventory turnover
Annual cost of goods sold divided by average inventory at cost.
How this works
Annual inventory turnover = annual cost of goods sold ÷ average inventory valued at cost. Average days in inventory = 365 ÷ turnover. If cost of goods sold is zero, turnover is zero and the days field reports no turnover instead of dividing by zero.
Example
The illustration may use different inputs from the reproducible default inputs listed below.
The defaults give $120,000/$30,000 = 4 turns per year. Average days are 365/4 = 91.25. With all reset-default inputs, inventory turns per year: 4.
- Annual cost of goods sold ($)
- 120000
- Average inventory at cost ($)
- 30000
- Inventory turns per year
- 4
Scope and assumptions
Uses a 365-day year and assumes the inventory and cost-of-goods-sold inputs use compatible costing methods. It does not calculate average inventory from transactions, adjust for seasonality or evaluate whether turnover is appropriate for the business.
Investor.gov — financial tools and calculators